Economic managers see no more underspending in 2020

MANILA, Philippines — Economic managers have expressed confidence that the economy would no longer have to suffer from public underspending next year as the House of Representatives had swiftly passed the proposed P4.1-trillion 2020 national budget.

Acting Budget Secretary Wendel E. Avisado and Socioeconomic Planning Secretary Ernesto M. Pernia were also confident that the Senate would follow suit and speed up budget passage.

“We have full trust and confidence in both the House of Representatives and the Senate. And just like the President, the legislature is as much concerned and conscious of the need to pass the 2020 national budget in due time after the required review and scrutiny,” Avisado said in a text message Friday night after the House passed the budget measure on third and final reading.

“This is welcome and I suspect the Senate will be constrained to follow suit. This minimizes the probability of a repeat of a re-enacted budget,” said Pernia, the country’s chief economist and head of the state planning agency National Economic and Development Authority (Neda).

Last month, Pernia warned Congress against delaying the passage of the proposed 2020 national budget — or else risk growing the economy by just below 5% next year.

Pernia had told the House appropriations committee that again operating on a reenacted budget next year would be “regressing” and would pull down gross domestic product (GDP) expansion as “government spending and even private spending on fixed capital formation will be hampered.”

“We are hoping, we are praying that it’s not going to happen again,” Pernia had said, referring to the delayed approval of the P3.7-trillion 2019 budget.

President Rodrigo Duterte signed this year’s appropriations only in mid-April as the two houses of Congress had squabbled over alleged insertions of pork funds.

As the government had operated using a reenacted 2018 budget at the start of the year, it underspent about P1 billion a day on public goods and services between January and April.

Government underspending pulled down first-half economic growth to an average of 5.5%, below the government’s 6-7% target range.

The economy needed to grow by an average of 6.4% in the second half to hit the lower end of the full-year goal.

For London-based Capital Economics, the election of the majority of President Duterte’s allies in Congress augured well for the on-time passage of the 2020 budget.

“The government shouldn’t have any problems getting the budget through Congress. The 2019 budget was delayed by nearly five months, which led to planned spending increases being postponed, causing growth to slow sharply. But after May’s midterm elections, the Senate is now packed with the supporters of the president,” Capital Economics senior economist Gareth Leather said in an Aug. 23 report titled “Fiscal caution in the Philippines and Indonesia.”

Capital Economics said that “while the government has been touting the boost to economic growth from the planned 12-percent increase in spending, with the budget deficit projected to remain unchanged at 3.2 percent of GDP the budget is likely to have a broadly neutral impact on the economy.”

Also, Capital Economics said: “The budget envisages a significant dialing back of the government’s infrastructure spending plans.”

“Spending on infrastructure is forecast to rise to 5.3 percent of GDP in 2020, down significantly from the 5.9 percent of GDP projected in the 2019 budget,” it noted.

“Last year’s sharp widening of the current account deficit, which was largely due to a surge in imports of capital goods to support the infrastructure drive, appears to have led the government to take a more cautious approach,” it added.

/atm